Off The Wire

CORRECTED-METALS-Zinc jumps to 8-month high on fears of supply crunch

(Corrects zinc milestone to 8-month peak, not 7-month high)
By Peter Hobson
LONDON, March 12 (Reuters) - Zinc prices jumped to an
eight-month peak on Tuesday, driven higher by a supply
shortfall, dwindling stockpiles on the London Metal Exchange
(LME) and expectations of solid demand from top consumer China.

Benchmark zinc on the LME ended up 3.7 percent at
$2,838 a tonne after touching $2,840, the highest since July 3.

The metal, used to galvanise steel, is up about 15 percent
this year.

Mines have begun to produce more zinc concentrate but not
enough metal is being refined to satisfy demand, pushing stocks
in LME warehouses to their lowest in more than a decade and
driving up the premium for nearby metal.

"The refined market is still very, very tight," said ICBC
Standard analyst Marcus Garvey. "We're probably not going back
to a refined surplus until next year."
He also said recent increases in lending and local
government bond issuance in China suggests demand for metals
will remain solid through this year.

STOCKS: Headline LME zinc stocks have fallen to 59,200
tonnes, the lowest since October 2007 . Between 50
and 79 percent of warrants are held by a single entity and about a quarter of the metal is already
earmarked for delivery.
SPREAD: Suggesting a shortage of immediately available metal
on the LME, the premium for cash zinc over the three-month
contract has surged to $49.50, the highest in two months. DEFICIT: The International Lead and Zinc Study Group (ILZSG)
said on Monday the global zinc market deficit narrowed to 28,000
tonnes in January from a revised deficit of 62,400 tonnes in
December. The ILZSG showed a deficit of 384,000 tonnes last year and
shortfalls of 442,000 tonnes and 128,000 tonnes respectively in
2017 and 2016. Analysts expect a fourth deficit this year.

POSITIONING: Speculative investors trimmed their net long
position in LME zinc to 5 percent of open contracts at the end
of last week from 9.3 percent in early February, according to
brokers Marex Spectron.

COPPER: LME copper finished up 1 percent at $6,472 a tonne,
nearing a 7-month high of $6,540 touched on Feb. 25.
TIGHT MARKET: Headline LME copper stocks at 112,725 tonnes are the lowest since May 2008, and between 50 and
79 percent of warrants are held by one entity ,
keeping the premium for cash metal over the three-month contract unusually high at $26 a tonne.

DOLLAR: The dollar weakened for a third day, helping boost
metals by making them cheaper for buyers holding other
currencies. OTHER METALS: Aluminium closed up 1.4 percent at
$1,873 a tonne, nickel rose 1.6 percent to $13,100, lead added 0.5 percent to $2,085 and tin ended 1.3
percent higher at $21,325.
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(Additional reporting by Tom Daly; Editing by Jan Harvey and
David Evans)

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